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The Recession Predictor, Still Predictive?

Jul 9, 2018

The yield curve has a sterling record as a recession predictor. Since 1970, every time the yield curve has inverted — in other words, every time long-term interest rates have fallen below short-term interest rates — the economy has slipped into recession within about a year.

We first checked in on the yield curve in January, after a period of notable flattening. In the time since, it's continued to flatten even more. It has not yet inverted, though it keeps inching closer.

Meanwhile, policymakers and economists everywhere are debating whether or not the yield curve remains as powerfully predictive as it once was.

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